An Overview & Outlook for the P/C Insurance Industry annual meeting/1. Keynote.pdf · 12/01/09 -...

An Overview & Outlook for the P/C Insurance Industry

with a Focus on the Inland Marine Class of Business

Inland Marine Underwriters Association

Austin, TX

May 19, 2014 Steven N. Weisbart, Ph.D., CLU, Senior Vice President & Chief Economist

Insurance Information Institute 110 William Street New York, NY 10038

Tel: 212.346.5540 Cell: 917.494.5945 [email protected] www.iii.org

2

The P/C Industry Overall

2013: Best Year in the Post-Crisis Era

Performance Improved with Lower CATs, Firming Markets

12/01/09 - 9pm

2

12/01/09 - 9pm eSlide – P6466 – The Financial Crisis and the Future of the P/C

3

P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter

Sources: ISO, Insurance Information Institute.

Sustained growth in written premiums (vs. the same quarter, prior year) should continue through 2014.

10

.2%

15

.1%

16

.8%

16

.7%

12

.5%

10

.1%

9.7

%7

.8%

7.2

%5

.6%

2.9

% 5.5

%-4

.6%

-4.1

%-5

.8%

-1.6

%1

0.3

%1

0.2

% 13

.4%

6.6

%-1

.6%

2.1

%0

.0%

-1.9

%0

.5%

-1.8

%-0

.7%

-4.4

%-3

.7%

-5.3

%-5

.2%

-1.4

%-1

.3%

1.3

%2

.3%

1.7

% 3.5

%1

.6% 4

.1%

3.8

%3

.0%

4.2

%5

.1%

4.8

%4

.1%

4.7

%4

.2%

4.7

%

-10%

-5%

0%

5%

10%

15%

20%

2002:Q

1

2002:Q

2

2002:Q

3

2002:Q

4

2003:Q

1

2003:Q

2

2003:Q

3

2003:Q

4

2004:Q

1

2004:Q

2

2004:Q

3

2004:Q

4

2005:Q

1

2005:Q

2

2005:Q

3

2005:Q

4

2006:Q

1

2006:Q

2

2006:Q

3

2006:Q

4

2007:Q

1

2007:Q

2

2007:Q

3

2007:Q

4

2008:Q

1

2008:Q

2

2008:Q

3

2008:Q

4

2009:Q

1

2009:Q

2

2009:Q

3

2009:Q

4

2010:Q

1

2010:Q

2

2010:Q

3

2010:Q

4

2011:Q

1

2011:Q

2

2011:Q

3

2011:Q

4

2012:Q

1

2012:Q

2

2012:Q

3

2012:Q

4

2013:Q

1

2013:Q

1

2013:Q

3

2013:Q

4

2013:Q4 premium growth was up 4.7%

over 2012:Q4, marking the 15th consecutive

quarter of y-o-y growth

Underwriting Gain (Loss) All Lines Combined, 1975–2013*

* Includes mortgage and financial guaranty insurers in all years.

Sources: A.M. Best, ISO; Insurance Information Institute.

Large underwriting losses are NOT sustainable in the current investment environment.

-$60

-$50

-$40

-$30

-$20

-$10

$0

$10

$20

$30

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

($ Billions) Underwriting profit in 2013 was $15.5B

High cat losses in 2011 led to the highest

underwriting loss since 2002

P/C Industry Net Income After Taxes 1991–2013

2005 ROE*= 9.6%

2006 ROE = 12.7%

2007 ROE = 10.9%

2008 ROE = 0.1%

2009 ROE = 5.0%

2010 ROE = 6.6%

2011 ROAS1 = 3.5%

2012 ROAS1 = 5.9%

2013 ROAS1 = 10.3%

•ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 8.9% ROAS through 2013:Q3, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.

Sources: A.M. Best, ISO, Insurance Information Institute

$1

4,1

78

$5

,84

0

$1

9,3

16

$1

0,8

70

$2

0,5

98

$2

4,4

04 $

36

,81

9

$3

0,7

73

$2

1,8

65

$3

,04

6

$3

0,0

29

$6

2,4

96

$3

,04

3

$3

5,2

04

$1

9,4

56 $

33

,52

2

$6

3,7

84

$2

8,6

72

-$6,970

$6

5,7

77

$4

4,1

55

$2

0,5

59

$3

8,5

01

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Net income was up substantially (+81.9%) from

2012

$ Millions

-5%

0%

5%

10%

15%

20%

25%

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2013*

*Profitability = P/C insurer ROEs. 2011-13 figures are estimates based on ROAS data. Note: Data for 2008-2013 exclude

mortgage and financial guaranty insurers.

Source: Insurance Information Institute; NAIC, ISO, A.M. Best.

1977:19.0% 1987:17.3%

1997:11.6% 2006:12.7%

1984: 1.8% 1992: 4.5% 2001: -1.2%

9 Years

History suggests next ROE

peak will be in 2016-2017

ROE

1975: 2.4%

2013 10.4%


7

P/C Insurance Industry Combined Ratio, 2001–2013*

* Excludes Mortgage & Financial Guaranty insurers 2008--2012. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013:Q3 = 95.8.

Sources: A.M. Best, ISO.

95.7

99.3

100.8

106.3

102.4

96.1

101.0

92.6

100.8

98.4

100.1

107.5

115.8

90

100

110

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Best Combined Ratio Since 1949 (87.6)

Relatively Low CAT Losses, Reserve Releases

Heavy Use of Reinsurance Lowered Net

Losses

Relatively Low CAT Losses, Reserve Releases

Avg. CAT Losses,

More Reserve Releases

Higher CAT

Losses, Shrinking Reserve

Releases, Toll of Soft

Market

Cyclical Deterioration

Sandy

Lower CAT

Losses


8

Policyholder Surplus, 2006:Q4–2013:Q4

Sources: ISO, A.M .Best.

($ Billions)

$4

87

.1

$4

96

.6

$5

12

.8

$5

21

.8

$4

78

.5

$4

55

.6

$4

37

.1

$4

63

.0

$4

90

.8

$5

11

.5

$5

40

.7

$5

30

.5

$5

44

.8

$5

59

.2

$5

59

.1

$5

38

.6

$5

50

.3

$5

67

.8

$5

83

.5

$5

87

.1 $6

24

.4

$6

53

.3

$5

70

.7

$5

66

.5

$5

05

.0

$5

15

.6

$5

17

.9

$400

$450

$500

$550

$600

$650

$700

06:Q

4

07:Q

1

07:Q

2

07:Q

3

07:Q

4

08:Q

1

08:Q

2

08:Q

3

08:Q

4

09:Q

1

09:Q

2

09:Q

3

09:Q

4

10:Q

1

10:Q

2

10:Q

3

10:Q

4

11:Q

1

11:Q

2

11:Q

3

11:Q

4

12:Q

1

12:Q

2

12:Q

3

12:Q

4

13:Q

3

13:Q

4

2007:Q3 Pre-Crisis Peak

2010:Q1 data includes $22.5B of

paid-in capital from a holding

company parent for one insurer’s

investment in a non-insurance

business .

The industry now has $1 of surplus for every $0.73 of NPW, the strongest claims-paying status in its history.

Drop due to near-record 2011 CAT losses

The P/C insurance industry entered 2014 in very strong financial shape.

9

Profitability and Growth in the Inland Marine Class of Business

10

Return on Net Worth, Countrywide, Direct: Inland Marine vs. All Lines, 2002-2011

Sources: NAIC, Report on Profitability by Line by State in 2011, p152; I.I.I.

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Inland Marine All Lines Combined

2005: KRW

Lower investment gains dampened

RNW

Inland Marine has consistently been one of the most profitable lines, but KRW took a toll in 2005.


11

IM Underwriting Profits* in 2011 Varied Widely by State and Region*

36

.5%

34

.5%

30

.2%

19

.4%

16

.4%

15

.4%

15

.2%

7.3

%

4.8

%

4.1

%

-2.6

%

-95

.4%

20

.8%

20

.4%

18

.1%

13

.4%

7.7

%

50

.6%

28

.0%

21

.5%

16

.3%

-5.9

%

-35

.6%

60

.9%

40

.2%

-140%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

LA

TN

FL

SC

NC

GA

VA

AR

MS

KY

AL

WV

MD

PA

NJ

DE

NY RI

ME

MA

CT

NH

VT

AK HI

*as Percent of Direct Premiums Earned

Sources: NAIC, Report on Profitability by Line by State in 2011, pp. 121-122; I.I.I..

Southeast Mid-Atlantic New England


12

IM Underwriting Profits* in 2011 Varied Widely by State and Region* (cont’d)

39

.7%

29

.9%

13

.9%

8.2

%

1.7

%

-22

.7%

24

.5%

28

.7%

31

.2%

17

.3%

13

.1%

14

.9%

19

.2%

17

.5%

20

.5%

23

.5%

24

.0%

13

.2%

22

.2%

24

.0%

27

.2%

26

.1%

22

.4%

2.2

%

27

.3%

-60%

-40%

-20%

0%

20%

40%

60%

AZ

NM

TX

OK

CO ID UT

WY

MT

OR

WA

CA

NV

OH

WI

MI

IN IL

KS

MO IA SD

MN

ND

NE

*as Percent of Direct Premiums Earned

Sources: NAIC, Report on Profitability by Line by State in 2011, pp. 121-122; I.I.I..

Southwest Mountain Far West Great Plains Great Lakes

13

Growth Rate of Net Premiums Written, Countrywide, Inland Marine vs. All Lines

Sources: I.I.I. calculations, based on data from A. M. Best, Aggregates & Averages, various issues

-10%

-5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Inland Marine All Lines Combined

…but by 2011 was even again

The Great Recession” hit the IM net premium

written growth rate harder than other lines…

14

Growth Rates: Inland Marine Net Premiums Written, Countrywide, vs. Nominal U.S. GDP


-9%

-6%

-3%

0%

3%

6%

9%

12%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Inland Marine Nominal U.S. GDP

…but by 2011 was even again

The Great Recession” hit the IM net premium

written growth rate harder than other lines…


15

Inland Marine Combined Ratio vs. All Lines & Commercial Lines, 2002–2011*

Source: A.M. Best, Aggregates & Averages 2012 Edition, pp. 373-378. and 2007 edition, pp. 413-418.

75

80

85

90

95

100

105

110

115

120

125

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

All Lines Comml Lines IM

16

Inland Marine Claim Cost Index vs. CPI


-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Inland Marine CPI

KRW The IM claim cost index

ranged between 1% and 4% since 2000, except for 2005


17

Inland Marine Combined Ratio, 1997–2011

Source: A.M. Best, Aggregates & Averages, 2012 and 2007 editions..

17.8 16.4 15.6 16 15.3 14.1 13.1 13.4 13.8 12.1 12.0 11.2 11.2 10.3 9.5

19.9 19.8 19.5 20.1 19.0 17.5 16.2 17.6 16.9 16.7 19.0 19.5 23.8 21.7 22.8

57.7 60.4 66.656.5 65.7

52.1 51.4 51.359.1

48.4 48.362.5 54.2 54.0

65.2

0

25

50

75

100

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Commissions Other Expenses L & LAE

5-year average expense ratio: 1997-2001, 35.9 2002-2006, 30.3 2007-2011, 32.2

The Strength of the Economy Will Influence IM

Growth Opportunities

18

Economic Growth

Will Expand the Exposure Base

12/01/09 - 9pm

18

12/01/09 - 9pm

19

Real Quarterly GDP Growth Since the “Great Recession, and Forecast

Forecasts from Blue Chip Economic Indicators; data are quarterly changes at annualized rates

Sources: (history) US Department of Commerce, Blue Chip Economic Indicators 4/14; Insurance Information Institute.

0.1

%

2.5

%

1.3

%

4.1

%

2.0

%

1.3

%

3.1

%

0.4

%

2.5

%

4.1

%

2.6

%

0.1

%

2.4

%

2.4

%

2.3

%

2.4

%

2.6

%

2.4

%

2.4

%

1.3

%

1.2

%

1.5

%

1.2

%

1.0

%

1.1

%

1.0

%

1.1

%

1.4

%

5.0

%

2.3

%

2.2

%

2.6

%

2.4

%

0%

1%

2%

3%

4%

5%

09

:3Q

09

:4Q

10

:1Q

10

:2Q

10

:3Q

10

:4Q

11

:1Q

11

:2Q

11

:3Q

11

:4Q

12

:1Q

12

:2Q

12

:3Q

12

:4Q

13

:1Q

13

:2Q

13

:3Q

13

:4Q

14

:1Q

14

:2Q

14

:3Q

14

:4Q

15

:1Q

15

:2Q

15

:3Q

15

:4Q

Demand for insurance continues to be affected by sluggish economic conditions, but the benefits of even slow growth will compound and

gradually benefit the economy broadly.

Additional growth forecast by average of 10 most optimistic

models

Growth forecast

by average of 10 least optimistic

models

Even 3% real growth in a quarter has rarely been achieved since

the Great Recession ended

0.1

%

0.1

%

12/01/09 - 9pm

20

Near-term growth

forecasts vary

widely by state.

Strongest growth

= blue,

then dark green;

weakest = beige

State-by-State Leading Indicators through 2014:Q3


21

Index of Total Industrial Production:* A New Peak in March 2014

*Monthly, seasonally adjusted, through March 2014 (which is preliminary). Index based on year 2007 = 100

Sources: Federal Reserve Board at http://www.federalreserve.gov/releases/g17/ipdisk/ip_sa.txt . National Bureau of Economic Research (recession dates); Insurance Information Institutes.

55

60

65

70

75

80

85

90

95

100

105

1/3

1/1

990

1/3

1/1

991

1/3

1/1

992

1/3

1/1

993

1/3

1/1

994

1/3

1/1

995

1/3

1/1

996

1/3

1/1

997

1/3

1/1

998

1/3

1/1

999

1/3

1/2

000

1/3

1/2

001

1/3

1/2

002

1/3

1/2

003

1/3

1/2

004

1/3

1/2

005

1/3

1/2

006

1/3

1/2

007

1/3

1/2

008

1/3

1/2

009

1/3

1/2

010

1/3

1/2

011

1/3

0/2

012

1/3

1/2

013

Recession

Peak at 100.82 in December 2007 (officially the 1st

month of the Great Recession)

Insurance exposures for industrial production will continue growing in 2014, and commercial insurance premium volume with them. Y-o-Y growth to October 2013 was

3.2%. Both production and premium volume growth for 2014 should exceed this.

12/01/09 - 9pm

21

March 2014 Index at 103.24,

a new peak

Many economists expect business

investment to rise in 2014

http://www.federalreserve.gov/releases/g17/ipdisk/ip_sa.txt


22

Commercial & Industrial Loans Outstanding at FDIC-Insured Banks, Quarterly, 2006-2013:Q4*

$1

.16

$1

.18

$1

.22

$1

.44

$1

.48

$1

.49

$1

.50

$1

.49

$1

.43

$1

.37

$1

.27

$1

.21

$1

.18

$1

.17

$1

.17

$1

.18

$1

.20

$1

.24

$1

.28 $1

.35

$1

.37

$1

.42

$1

.45

$1

.50

$1

.52

$1

.55

$1

.57

$1

.60

$1

.13

$1

.25

$1

.30 $

1.3

9

$1.0

$1.1

$1.2

$1.3

$1.4

$1.5

$1.6

$1.7

06

:Q1

06

:Q3

07

:Q1

07

:Q3

08

:Q1

08

:Q3

09

:Q1

09

:Q3

10

:Q1

10

:Q3

11

:Q1

11

:Q3

12

:Q1

12

:Q3

13

:Q1

13

:Q3

Outstanding Commercial Loan Volume Has Been Growing for Over Two Years and Is Now Nearly Back to Early Recession Levels. Bodes Very Well for the Creation of Current and Future Commercial Insurance Exposures

*Latest data as of 3/4/2014. Source: FDIC at http://www2.fdic.gov/qbp/ (Loan Performance spreadsheet); Insurance Information Institute.

$Trillions

Commercial lending plunged by 21.2% ($330B) during the financial crisis and ensuing

period of tight credit

Commercial lending activity exceeds pre-crisis levels (+36.75% or $430B above

mid-2010 trough)

http://www2.fdic.gov/qbp/


23

Percent of Non-current Commercial & Industrial Loans Outstanding at FDIC-Insured Banks, Quarterly, 2006-2013:Q4*

0.7

0%

0.7

4%

0.6

4%

0.6

7%

0.8

1%

1.0

7%

1.1

8% 1

.69

% 2.2

5% 2

.80

%

3.5

7%

3.4

3%

3.0

5%

2.8

3%

2.7

3%

2.4

4%

1.8

9%

1.6

5%

1.4

9%

1.2

9%

1.1

7%

1.0

9%

0.9

8%

0.8

8%

0.8

0%

0.7

4%

0.7

2%

0.6

2%

0.7

1%

0.6

3%

0.6

2%

0.6

3%

0%

1%

2%

3%

4%

06

:Q1

06

:Q2

06

:Q3

06

:Q4

07

:Q1

07

:Q2

07

:Q3

07

:Q4

08

:Q1

08

;Q2

08

:Q3

08

:Q4

09

:Q1

09

:Q2

09

:Q3

09

:Q4

10

:Q1

10

:Q2

10

:Q3

10

:Q4

11

:Q1

11

:Q2

11

:Q3

11

:Q4

12

:Q1

12

:Q2

12

:Q3

12

:Q4

13

:Q1

13

:Q2

13

:Q3

13

:Q4

Non-current loans (those past due 90 days or more or in nonaccrual status) are back to early-recession levels, fueling bank willingness to lend.

*Latest data as of 3/4/2014. Source: FDIC at http://www2.fdic.gov/qbp/ (Loan Performance spreadsheet); Insurance Information Institute.

Back to “normal” levels of noncurrent industrial

& commercial loans

Recession

http://www2.fdic.gov/qbp/

24

2.5%

4.9%

6.3%

7.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2013 2014F 2015F 2016F

Business Investment* is Expected to Accelerate in 2014-16, Fueling Commercial Exposure Growth

Accelerating business investment will be a potent driver

of commercial property and liability insurance exposures

*consists of new orders of non-defense capital goods, excluding aircraft, plus buildings and software

Sources: IHS Global Insights as of Jan.13, 2014; Insurance Information Institute.

Accelerating business investment should also drive employment and WC payroll exposures (with a lag).

Outlook for the Construction, Manufacturing, and Energy

Industries

25

Critical to the Economy and to Inland Marine Insurance

12/01/09 - 9pm

25

Outlook for Construction

26

12/01/09 - 9pm

26


27

$314.9$304.0

$286.4 $279.0 $274.4

$216.1 $220.2$234.2

$255.4

$289.1$308.7

$0

$50

$100

$150

$200

$250

$300

$350

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

($ Billions)

Government Construction Spending Peaked in 2009, Helped by Stimulus Spending, but Continues to Contract As State/Local Governments

Grapple with Deficits and Federal Sequestration Takes Hold

Value of New Federal, State and Local Government Construction: 2003-2013*

*2013 figure is a seasonally adjusted annual rate as of December.

Sources: US Department of Commerce; Insurance Information Institute.

Construction across all levels of government

peaked at $314.9B in 2009

Austerity Reigns

Govt. construction is still shrinking, down $40.5B or

12.9% since 2009 peak

12/01/09 - 9pm

28

Architecture Billings Index: Numbers over 50 Indicate Expanded Construction Spending in 9-12 Months

This index has indicated expansion

during 16 of the last 20 months.

The index was at 48.8 in March, down from 50.7

in February.

This includes commercial and industrial

facilities like hotels and office buildings,

multi-family residential, as well as

schools, hospitals and other institutions.


29

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Jan-9

2

Jan-9

3

Jan-9

4

Jan-9

5

Jan-9

6

Jan-9

7

Jan-9

8

Jan-9

9

Jan-0

0

Jan 0

1

Jan 0

2

Jan 0

3

Jan 0

4

Jan 0

5

Jan 0

6

Jan 0

7

Jan 0

8

Jan 0

9

Jan 1

0

Jan 1

1

12-J

an

Jan 1

3

Jan 1

4

Dollar Value* of New Orders for Construction Machinery Monthly, Feb. 1992—Feb. 2014

*seasonally adjusted; Feb. 2014 is preliminary; data published April 2, 2014. Source: U.S. Census Bureau, Full Report on Manufacturers’ Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/

New orders of $6 billion in January 2013 exceeded the pre-crisis (March 2008) peak of $5.6 billion.

Since this new peak new orders have been steady at about $5 billion per month.

$ Millions

12/01/09 - 9pm

29

The value of new orders for construction machinery appears to be rising again.

http://www.census.gov/manufacturing/m3/


30

Value of Construction Put in Place* Post-Recession, by Segment, Monthly

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

Ju

l-0

9

Se

p

No

v

Ja

n-1

0

Ma

r

Ma

y

Ju

l-1

0

Se

p

No

v

Ja

n-1

1

Ma

r

Ma

y

Ju

l-1

1

Se

p

No

v

Ja

n-1

2

Ma

r

Ma

y

Ju

l-1

2

Se

p

No

v

Ja

n-1

3

Ma

r

Ma

y

Ju

l-1

3

Se

p

No

v

Ja

n-1

4

Ma

r

Communication Transportation Power

Since the Great Recession ended, there has been virtually no growth in the value of construction for either Transportation or Communications put in

place. However, some construction might replace aging former structures. *seasonally-adjusted annual rate Sources: http://www.census.gov/construction/c30/historical_data.html Insurance Information Institute.

$Billions

http://www.census.gov/construction/c30/historical_data.html

http://www.census.gov/construction/c30/historical_data.html


31

Construction Employment, Jan. 2010—March 2014*

*Seasonally adjusted.

Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.

5,5

81

5,5

22

5,5

42

5,5

54

5,5

27

5,5

12

5,4

97

5,5

19

5,4

99

5,5

01

5,4

97

5,4

68

5,4

35 5,4

78

5,4

85

5,4

97

5,5

24

5,5

30

5,5

47

5,5

46

5,5

83

5,5

76

5,5

77

5,6

12

5,6

29

5,6

44

5,6

40

5,6

36

5,6

15

5,6

22

5,6

27

5,6

30

5,6

33

5,6

49

5,6

73

5,7

11

5,7

35 5,7

83

5,7

99

5,7

92

5,7

91

5,8

01

5,8

04

5,8

05

5,8

22

5,8

30

5,8

49

5,8

76 5,9

27

5,9

45

5,9

64

5,400

5,500

5,600

5,700

5,800

5,900

6,000

Ja

n-1

0F

eb

-10

Ma

r-1

0A

pr-

10

Ma

y-1

0Ju

n-1

0Ju

l-1

0A

ug

-10

Se

p-1

0O

ct-

10

No

v-1

0D

ec-1

0Ja

n-1

1F

eb

-11

Ma

r-1

1A

pr-

11

Ma

y-1

1Ju

n-1

1Ju

l-1

1A

ug

-11

Se

p-1

1O

ct-

11

No

v-1

1D

ec-1

1Ja

n-1

22

/30

/2M

ar-

12

Ap

r-1

2M

ay-1

2Ju

n-1

2Ju

l-1

2A

ug

-12

Se

p-1

2O

ct-

12

No

v-1

2D

ec-1

2Ja

n-1

3F

eb

-13

Ma

r-1

3A

pr-

13

Ma

y-1

3Ju

n-1

3Ju

l-1

3A

ug

-13

Se

p-1

2O

ct-

13

No

v-1

3D

ec-1

3Ja

n-1

4F

eb

-14

Ma

r-1

4

Construction employment is +529,000 above

Jan. 2011 (+9.7%) trough

(Thousands)

Construction and manufacturing employment constitute 1/3 of all payroll exposure.

http://data.bls.gov/

12/01/09 - 9pm

32

Construction Employment:

A Longer-Term Look (1969-2014)

Outlook for Manufacturing

33

12/01/09 - 9pm

33

12/01/09 - 9pm

34

The Fed’s Manufacturing Surveys Indicate Continued Growth

Numbers over 50 Indicate

Expanded Manufacturing Activity


35

$200,000

$300,000

$400,000

$500,000

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan 01

Jan 02

Jan 03

Jan 04

Jan 05

Jan 06

Jan 07

Jan 08

Jan 09

Jan 10

Jan 11

12-Jan

Jan 13

Jan 14

Dollar Value* of Manufacturers’ Shipments Monthly, Jan. 1992—Feb. 2014

*seasonally adjusted; Feb. 2014 is preliminary; data published April 2, 2014. Source: U.S. Census Bureau, Full Report on Manufacturers’ Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/

Monthly shipments in November 2013 exceeded the pre-crisis (July 2008) peak; December 2013 and January 2014 slipped a bit.

February 2014 was only slightly below November 2013.

$ Millions

12/01/09 - 9pm

35

The value of Manufacturing Shipments in Nov. 2013 was $493.9B—a new record high.

http://www.census.gov/manufacturing/m3/


36

Manufacturing Employment, Jan. 2010—March 2014*

11

,46

01

1,4

60

11

,46

61

1,4

97

11

,53

11

1,5

39

11

,55

81

1,5

48

11

,55

41

1,5

55

11

,57

71

1,5

90

11

,62

41

1,6

62

11

,68

21

1,7

07

11

,71

51

1,7

24

11

,74

71

1,7

60

11

,76

21

1,7

70

11

,76

91

1,7

97

11

,84

11

1,8

70

11

,91

01

1,9

20

11

,92

61

1,9

35

11

,95

71

1,9

43

11

,92

51

1,9

31

11

,93

81

1,9

51

11

,96

51

1,9

88

11

,98

41

1,9

77

11

,97

21

1,9

65

11

,94

81

1,9

63

11

,99

31

2,0

11

12

,04

61

2,0

53

12

,06

11

2,0

80

12

,07

9

11,250

11,500

11,750

12,000

12,250Ja

n-1

0F

eb

-10

Ma

r-1

0A

pr-

10

Ma

y-1

0Ju

n-1

0Ju

l-1

0A

ug

-10

Se

p-1

0O

ct-

10

No

v-1

0D

ec-1

0Ja

n-1

1F

eb

-11

Ma

r-1

1A

pr-

11

Ma

y-1

1Ju

n-1

1Ju

l-1

1A

ug

-11

Se

p-1

1O

ct-

11

No

v-1

1D

ec-1

1Ja

n-1

22

/30

/2M

ar-

12

Ap

r-1

2M

ay-1

2Ju

n-1

2Ju

l-1

2A

ug

-12

Se

p-1

2O

ct-

12

No

v-1

2D

ec-1

2Ja

n-1

3F

eb

-13

Ma

r-1

3A

pr-

13

Ma

y-1

3Ju

n-1

3Ju

l-1

3A

ug

-13

Se

p-1

3O

ct-

13

No

v-1

3D

ec-1

3Ja

n-1

4F

eb

-14

Ma

r-1

4

Manufacturing employment is a surprising source of strength in the economy. Employment in the sector is at a multi-year high.

*Seasonally adjusted; Feb. and Mar. 2014 are preliminary


(Thousands) Since Jan 2010, manufacturing employment

is up (+619,000 or +5.4%) and still growing.


Outlook for Energy

37

12/01/09 - 9pm

37

U.S. Natural Gas Imports and Exports, 1990 - 2040

Sources: US Energy Information Administration, Annual Energy Outlook 2014 Early Release Overview; ;Insurance Information Institute.

12/01/09 - 9pm

38

Trillions of Cubic Feet

The US is now the world’s

largest natural gas producer (but Russia is

the largest exporter).


40

Projected Change in Energy Generation by Renewables, 2014-2015

3.7%

8.9%

-1.0%

5.2%

15.5%

3.6%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Hydropower Non-hydropower Wind power

2014 2015

The US Energy Information Agency projects good growth in non-hydropower sources of electricity generation in the next two years. One non-

hydropower source--wind power--is expected to show rapid development. Hydropower, however, is expected to contract slightly in 2015.

Sources: http://www.eia.gov/forecasts/steo/report/renew_co2.cfm ; Insurance Information Institute.

http://www.eia.gov/forecasts/steo/report/renew_co2.cfm

http://www.eia.gov/forecasts/steo/report/renew_co2.cfm


41

Projected Change in Energy Generation by Renewables, 2012-2020

3.3

141.9

36.7

14.5

217.5

11.0

0

25

50

75

100

125

150

175

200

225

Biomass Solar photovoltaic Wind

2012 2020

As a percent of current generating capacity, both solar photovoltaic and biomass are projected to grow strongly through 2020, but both are (and will

remain) much smaller sources of electricity than wind power.

Sources: U.S. Energy Information Administration, Annual Energy Outlook 2014, at http://www.eia.gov/forecasts/aeo/pdf/tbla16.pdf ; Insurance Information Institute.

Billions of Kilowatts

generated

http://www.eia.gov/forecasts/aeo/pdf/tbla16.pdf




43

Oil & Gas Extraction Employment, Jan. 2010—March 2014*

*Seasonally adjusted


15

6.4

15

6.4

15

6.7

15

7.6

15

8.7

15

7.8

15

8.0

15

9.5

16

0.0

16

1.5

16

1.2

16

1.2

16

3.1

16

4.4

16

6.6

16

9.3

17

0.1

17

1.0

17

2.5

17

3.6

17

6.3

17

8.2

17

8.5

18

0.9

18

1.9

18

3.1

18

4.8

18

5.2

18

5.7

18

6.8

18

7.6

18

8.0

18

8.0

18

8.2

19

0.0

19

1.7

19

1.9

19

3.4

19

2.4

19

2.6

19

3.1

19

3.3

19

5.0

19

6.5

19

9.7

20

0.6

20

3.0

20

4.1

20

5.3

20

7.7

20

8.1

150

160

170

180

190

200

210

220

Ja

n-1

0F

eb

-10

Ma

r-1

0A

pr-

10

Ma

y-1

0Ju

n-1

0Ju

l-1

0A

ug

-10

Se

p-1

0O

ct-

10

No

v-1

0D

ec-1

0Ja

n-1

1F

eb

-11

Ma

r-1

1A

pr-

11

Ma

y-1

1Ju

n-1

1Ju

l-1

1A

ug

-11

Se

p-1

1O

ct-

11

No

v-1

1D

ec-1

1Ja

n-1

22

/30

/2M

ar-

12

Ap

r-1

2M

ay-1

2Ju

n-1

2Ju

l-1

2A

ug

-12

Se

p-1

2O

ct-

12

No

v-1

2D

ec-1

2Ja

n-1

3F

eb

-13

Ma

r-1

3A

pr-

13

Ma

y-1

3Ju

n-1

3Ju

l-1

3A

ug

-13

Se

p-1

3O

ct-

13

No

v-1

3D

ec-1

3Ja

n-1

4F

eb

-14

Ma

r-1

4

Oil and gas extraction employment is up 33% since Jan. 2010. Domestic energy

production is essential to any robust US economic recovery.

(Thousands) Highest

since Aug. 1986


Outlook for the Medical Sector

44

12/01/09 - 9pm

44


45

$4

0.9

$4

2.2

$4

3.8

$4

6.1

$4

7.8

$5

0.1

$5

2.8

$5

5.9

$5

9.3

$6

2.8

$6

6.7

$3

2.9

$3

4.3

$3

4.9

$3

4.9

$3

6.9

$3

8.9

$0

$10

$20

$30

$40

$50

$60

$70

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Durable Medical Equipment is Projected to Grow by 5%-6% per year

Sources: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/proj2012.pdf , Table 2 Insurance Information Institute.

The market for durable medical equipment is projected to grow at 5%-6% every year through 2022. The amount spent in 2022 will be

nearly double the spending in 2009.

$ Billions

12/01/09 - 9pm

45

Projected Actual

http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/proj2012.pdf

















46

$1

09

.7

$1

14

.1

$1

20

.8

$1

27

.2

$1

34

.3

$1

43

.1

$1

53

.1

$1

63

.9

$1

74

.9

$1

86

.0

$1

96

.8

$8

9.6

$1

01

.7

$1

10

.4

$1

00

.8

$1

00

.1

$1

03

.7

$50

$100

$150

$200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Health Care Investment in Structures and Equipment

Sources: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/proj2012.pdf , Table 2; Insurance Information Institute.

The extent of health care investment in structures and equipment is projected to grow at 6%-7% from 2017 through 2022. The amount

spent in 2022 will be nearly double the spending in 2009-10.

$ Billions

12/01/09 - 9pm

46

Projected Actual

Effect of the “Great

Recession”


















47

Health Care Employment, Jan. 2010—March 2014*

*Seasonally adjusted; Feb and Mar 2014 data are preliminary. Sources: US Bureau of Labor Statistics at http://data.bls.gov; I.I.I.

13,6

71

13,6

87

13,7

19

13,7

31

13,7

47

13,7

64

13,7

83

13,8

07

13,8

16

13,8

43

13,8

69

13,8

96

13,8

99

13,9

16

13,9

44

13,9

74

13,9

88

14,0

17

14,0

43

14,0

70

14,1

01

14,1

18

14,1

24

14,1

33

14,1

61

14,1

93

14,2

17

14,2

30

14,2

61

14,2

70

14,2

85

14,2

96

14,3

29

14,3

56

14,3

73

14,4

01

14,4

06

14,4

29

14,4

40

14,4

70

14,4

83

14,5

00

14,5

04

14,5

47

14,5

50

14,5

73

14,6

02

14,6

05

14,6

10

14,6

29

14,6

48

13,500

13,750

14,000

14,250

14,500

14,750

15,000Ja

n-1

0F

eb

-10

Ma

r-1

0A

pr-

10

Ma

y-1

0Ju

n-1

0Ju

l-1

0A

ug

-10

Se

p-1

0O

ct-

10

No

v-1

0D

ec-1

0Ja

n-1

1F

eb

-11

Ma

r-1

1A

pr-

11

Ma

y-1

1Ju

n-1

1Ju

l-1

1A

ug

-11

Se

p-1

1O

ct-

11

No

v-1

1D

ec-1

1Ja

n-1

22

/30

/2M

ar-

12

Ap

r-1

2M

ay-1

2Ju

n-1

2Ju

l-1

2A

ug

-12

Se

p-1

2O

ct-

12

No

v-1

2D

ec-1

2Ja

n-1

3F

eb

-13

Ma

r-1

3A

pr-

13

Ma

y-1

3Ju

n-1

3Ju

l-1

3A

ug

-13

Se

p-1

3O

ct-

13

No

v-1

3D

ec-1

3Ja

n-1

4F

eb

-14

Ma

r-1

4

Health care employment has grown every single month since January 1990, when the BLS database begins

(Thousands)


48

Update: U.S. Insured Catastrophe Losses

2013 Was a Welcome Respite from the

High Catastrophe Losses in Recent Years

2014 Winter Storm Losses Manageable

12/01/09 - 9pm

48


49

$1

2.6

$1

1.0

$3

.8

$1

4.3

$1

1.6

$6

.1

$3

4.7

$7

.6 $1

6.3

$3

3.7

$7

3.4

$1

0.5

$7

.5

$2

9.2

$1

1.5

$1

4.4

$3

3.6

$3

5.0

$1

2.8

$1

4.0

$4

.8

$8

.0

$3

7.8

$8

.8

$2

6.4

$0

$30

$60

$90

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

U.S. Insured Catastrophe Losses

Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.)

Sources: Property Claims Service/ISO; Insurance Information Institute.

2012 was the 3rd highest year in U.S. history for inflation-adjusted insured CAT losses.

2011 losses were the 6th highest. 2013 ran well below 2011 and 2012 YTD totals.

A “new normal”? In half of the years since 2001 insured CAT losses surpassed $29 billion.

($ Billions, $ 2012)

12/01/09 - 9pm

49

12/01/09 - 9pm

50

Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2013*

*2010s represent 2010-2013.

Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers.

Source: ISO (1960-2011); A.M. Best (2012E) Insurance Information Institute.

0.4

1.2

0.4 0

.8 1.3

0.3

0.4 0

.71

.51

.00

.40

.4 0.7

1.8

1.1

0.6

1.42

.01

.32

.00

.50

.5 0.7

3.0

1.2

2.1

8.8

2.3

5.9

3.3

2.8

1.0

3.6

2.9

1.6

5.4

1.6

3.3

3.3

8.1

2.7

1.6

5.0

2.6

3.4

8.7 8.9

3.43.6

0.9

0.1

1.1

1.1

0.8

0

1

2

3

4

5

6

7

8

9

10

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades

Avg. CAT Loss Component of the Combined Ratio

by Decade

1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 6.1E*

Combined Ratio Points Catastrophe losses as a share of all losses reached

a record high in 2012

12/01/09 - 9pm

51

Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1993–20121

0.1%

1.7%

3.8%4.7%

6.3%

7.1%

36.0%

40.4%

1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2012 dollars.

2. Excludes snow.

3. Does not include NFIP flood losses

4. Includes wildland fires

5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.

Source: ISO’s Property Claim Services Unit.

Hurricanes & Tropical Storms, $158.2

Fires (4), $6.5

Tornadoes (2), $140.9

Winter Storms, $27.8

Terrorism, $24.8

Geological Events, $18.4

Wind/Hail/Flood (3), $14.9

Other (5), $0.2

Wind losses are by far cause the most catastrophe losses,

even if hurricanes/TS are excluded.

Tornado share of CAT losses is

rising

Insured cat losses from 1993-2012

totaled $391.7B, an average of $19.6B per year or $1.6B

per month

12/01/09 - 9pm

52

The Dozen Costliest Disasters in U.S. History

Insured Losses, 2012 Dollars, $ Billions

$13.4

$18.8$23.9 $24.6 $25.6

$48.7

$11.1$9.2$8.7$7.8$7.5$7.1

$0

$10

$20

$30

$40

$50

$60

Torna

does/T-

Storms

(2011)

Torna

does/T-

Storms

(2011)

Hugo

(1989)

Ivan (2004) Charley

(2004)

Wilma (2005) Ike

(2008)

Sandy*

(2012)

Northridge

(1994)

9/11 Attack

(2001)

Andrew

(1992)

Katrina

(2005)

Hurricane Sandy became the 5th costliest event in U.S. insurance history

Includes Tuscaloosa, AL, tornado

Includes Joplin, MO, tornado

8 of the 12 most expensive events in U.S. history occurred in 2004 or more recently

*PCS estimate as of 4/12/13.

Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.


53

Total Value of Insured Coastal Exposure in 2012

(2012, $ Billions)

Source: AIR Worldwide

$293.5

$239.3

$182.3

$164.6

$163.5

$118.2

$106.7

$81.9

$64.0

$60.6

$58.3

$17.3

$567.8

$713.9

$849.6

$1,175.3

$2,862.3

$2,923.1

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500

New York

Florida

Texas

Massachusetts

New Jersey

Connecticut

Louisiana

S. Carolina

Virginia

Maine

North Carolina

Alabama

Georgia

Delaware

New Hampshire

Mississippi

Rhode Island

Maryland

In 2012, New York Ranked as the #1 Most Exposed State to Hurricane Loss, Overtaking Florida with $2.862 Trillion. Texas is very exposed too, and

ranked #3 with $1.175 Trillion in insured coastal exposure

The Insured Value of All Coastal Property Was $10.6 Trillion in 2012 , Up 20% from $8.9 Trillion in 2007 and

Up 48% from $7.2 Trillion in 2004

NY and FL lead the US in the value of insured coastal exposure at $2.9 Trillion

As of December 31,

2013

Number of

Events Fatalities

Estimated Overall

Losses (US $m)

Estimated Insured

Losses (US $m)

Severe

Thunderstorm 69 110 16,341 10,274

Winter Storm 11 43 2,935 1,895

Flood 19 23 1,929 240

Earthquake &

Geophysical 6 1 Minor Minor

Tropical Cyclone 1 1 Minor Minor

Wildfire, Heat, &

Drought 22 29 620 385

Totals 128 207 21,825 12,794

Natural Disaster Losses in the United States, by Type, 2013

54 Source: Munich Re NatCatSERVICE 54

55 Sources: Munich Re NatCatSERVICE; Insurance Information Institute.

Winter Storm and Winter Damage Events in the US and Canada, 1980-2013

Three of the four costliest years for insured losses from winter

storms and damage occurred in the 1990s, led by the “Storm of

the Century” in 1993.

Insured losses from

severe winter events

totaled $2 billion in

2013.

Insured winter storm and damage losses in Jan. 2014 already totaled $1.5 billion. Continued severe weather since then makes it likely that

2014 will become one of the top 5 costliest winters since 1980.

Insured Losses (Millions, $ 2013)

5-year running average

http://www.spc.noaa.gov/wcm/torngraph-big.png



U.S. Thunderstorm Insured Loss Trends, 1980 – 2013

56

Source: Property Claims Service, and MR NatCatSERVICE

Thunderstorm losses in 2013 totaled $10.3 billion, the 6th

highest on record

Average

thunderstorm

losses are up 7 fold

since the early

1980s. The 5-year

running average

loss is up sharply

Hurricanes get all the headlines,

but thunderstorms are consistent

producers of large scale loss.

2008-2013 are the most expensive

years on record.

Nu

mb

er

Geophysical

(earthquake, tsunami,

volcanic activity)

Climatological

(temperature extremes,

drought, wildfire)

Meteorological (storm)

Hydrological

(flood, mass movement)

Number of Natural Disaster Events in the United States, Yearly, 1980 – 2013

Source: MR NatCatSERVICE 57

22

19

81

6

50

100

150

200

250

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

There were 128 natural disaster events in 2013

Losses Due to Natural Disasters in the US, 1980–2013

58

Overall losses (in 2012 values) Insured losses (in 2013 values)

Source: MR NatCatSERVICE

(2013 Dollars, $ Billions) (Overall and Insured Losses)

50

100

150

200

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

2013 CAT Losses

Overall : $21.8B

Insured: $12.8B

Indicates a great deal of losses are uninsured (~40%-50% in the US) =

Growth Opportunity

2013 losses were far below 2011 and 2012 and were 44% lower

than the average from 2000-2012

Investment Performance: a Key Driver of Profitability

59

Depressed Yields Influence Underwriting & Pricing

12/01/09 - 9pm

59

Property/Casualty Insurance Industry Net Investment Gain: 1994–20131

$35.4 $

42.8

$47.2 $52.3

$44.4

$36.0

$45.3

$48.9

$59.4

$55.7

$64.0

$31.7

$39.2

$53.4

$56.2

$53.9 $58.8

$58.0

$51.9 $56.9

$0

$10

$20

$30

$40

$50

$60

$70

94 95 96 97 98 99 00 01 02 03 04 05* 06 07 08 09 10 11 12 13

In dollar terms, investment gains are roughly back where they were in 1998-2000, but their purchasing power is somewhat less.

1 Investment gains consist primarily of interest, stock dividends and realized capital gains and losses. * 2005 figure includes special one-time dividend of $3.2B; Sources: ISO; Insurance Information Institute.

($ Billions)


61

U.S. Treasury 2- and 10-Year Note Yields*: 1990–2014

*Monthly, constant maturity, nominal rates, through March 2014.

Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institutes.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1/3

1/1

990

1/3

1/1

991

1/3

1/1

992

1/3

1/1

993

1/3

1/1

994

1/3

1/1

995

1/3

1/1

996

1/3

1/1

997

1/3

1/1

998

1/3

1/1

999

1/3

1/2

000

1/3

1/2

001

1/3

1/2

002

1/3

1/2

003

1/3

1/2

004

1/3

1/2

005

1/3

1/2

006

1/3

1/2

007

1/3

1/2

008

1/3

1/2

009

1/3

1/2

010

1/3

1/2

011

1/3

0/2

012

1/3

1/2

013

Recession2-Yr Yield10-Yr Yield

Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for a full decade.

Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come.

U.S. Treasury 10-year note

yields recently “spiked” up

12/01/09 - 9pm

61

http://www.federalreserve.gov/releases/h15/data.htm


62

Distribution of Bond Maturities, P/C Insurance Industry, 2003-2013

14.4%

15.4%

16.0%

16.0%

15.2%

15.7%

15.6%

16.0%

14.9%

16.6%

16.5%

29.8%

29.2%

28.8%

29.5%

30.0%

32.4%

36.4%

39.5%

41.2%

40.4%

38.8%

31.3%

32.5%

34.1%

34.1%

33.8%

31.2%

29.0%

27.1%

27.3%

27.6%

29.3%

15.4%

15.4%

13.6%

13.1%

12.9%

12.7%

11.9%

11.2%

10.4%

9.8%

9.8%

9.2%

7.6%

7.6%

7.4%

8.1%

8.1%

7.1%

6.2%

6.2%

5.7%

5.7%

0% 20% 40% 60% 80% 100%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Under 1 year

1-5 years

5-10 years

10-20 years

over 20 years

Sources: SNL Financial; Insurance Information Institute.

The main shift over these years has been from bonds with longer maturities to bonds with shorter maturities. The industry first trimmed its holdings of over-10-year bonds

(from 24.6% in 2003 to 15.5% in 2012) and then trimmed bonds in the 5-10-year category (from 31.3% in 2003 to 27.6% in 2012) . Falling average maturity of the P/C industry’s

bond portfolio is contributing to a drop in investment income along with lower yields.

www.iii.org

Thank you for your time and your attention!

Insurance Information Institute Online:

12/01/09 - 9pm

63

An Overview & Outlook for the P/C Insurance Industry annual meeting/1. Keynote.pdf · 12/01/09 -...

Documents

Transcript of An Overview & Outlook for the P/C Insurance Industry annual meeting/1. Keynote.pdf · 12/01/09 -...